A nationwide boom in campus construction in China has provided ample opportunity for graft

Corruption on College Campuses

By Shen Nianzu (沈念祖)
Issue 622, June 2, 2013

In May, Nanchang University President Zhou Wenbin (周文斌) was detained and removed from the 12th National People’s Congress. A source close to the Jiangxi provincial Commission for Discipline Inspection revealed that the case is related to construction of the school’s new campus.

In the past five years, 14 university officials in Jiangxi have been involved in corruption related to campus construction – three of whom were university presidents.

Du Zhizhou (杜治洲), vice-director of the Clean Politics Institution in Beijing University of Aeronautics & Astronautics, found that from 1988 to 2009, out of 200 corruption cases in public universities nationwide, 34 percent were related to construction.The chief prosecutor in a Jiangxi city revealed that Zhou’s case is related to the bribery case of Liu Zhihe (刘志和), the former vice president of Nanchang Hangkong University (NCHU). Allegedly, both cases involved bribery by the same person. In February, Liu was sentenced to 15 years imprisonment for accepting bribes related to university construction.

Liu worked at NCHU for over 20 years, during which he was in charge of school property and infrastructure. During his tenure as vice president, when he oversaw new campus construction, he accepted bribes of 2.62 million yuan from 12 different people. Most of these alleged bribes happened just before holidays like Spring Festival

Tang Xinbo (唐新波), a lawyer from Beijing Kangda Law Firm, has worked on a number of university bribery cases. “Some leaders and cadres lack vigilance in thought,” Tang said. “They see these holiday ‘red envelopes’ and ‘cash gifts’ as part of keeping social relationships and welcome them. This results in festival periods being high-season for corruption.”

Xiao Yang (a pseudonym), a professor in the Nanchang University School of Economics and Management, says that the system is to blame for these cases. Two years ago, former director of Nanchang University’s infrastructure office Zhou Guangwen (周光文) was also detained for taking bribes. Xiao Yang said the project in question involved 2 billion yuan, so it couldn’t have been just one person that had the final say. He believes both Zhou Wenbin and Zhou Guangwen are victims of the existing university infrastructure system.

There’s a joke floating around Chinese universities saying, “If you like him, put him in charge of infrastructure. If you hate him, also put him in charge of infrastructure.”

In 2009, Wang Wei (王伟), who was thenon the Standing Committee of the Central Commission for Discipline Inspection, said that infrastructure construction in the education system had become the area most prone to corruption.

Sun Yi (孙义), director of Nanjing University of Technology’s infrastructure office, has done special research on this issue. He says that by the most conservative estimate, at least 2 billion yuan has been illegally diverted to private hands nationwide through university construction. In these cases, it’s not only top university officials that are responsible. Several levels of infrastructure personnel have been discovered accepting bribes from project managers, suppliers and contractors.

According to Sun Yi’s research based on 100 criminal cases, the longest period between when a criminal began their corruption and when they were first investigated was 12 years. The average timespan was four-and-a-half years. Sun says that during their period of criminal activity, not a single of the 100 people was demoted or fired. In fact, 32 received promotions.

Because of China’s rapid growth in college enrollment, campuses have had to keep up with the expanding infrastructure demand with major construction projects. According to statistics from the Ministry of Education, more university cafeterias and dormitories were built in 2006 than during the previous 50 years combined.

Jiangxi Daily reported in 2003 that the local government had invested 12 million yuan in two areas in Nanchang with several college campuses. This stimulated 10 billion yuan in university infrastructure investment, which created huge potential for corruption.

Sun Yi says that universities have their own infrastructure, accounting, auditing, and discipline inspection offices, so it’s difficult for outside supervision to be effective. This, he believes, is the main reason for the serious corruption issues. “Our solution is to let more people be involved in making decisions and try decentralizing power,” he says.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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